To mark this momentous year for UK GAAP, I'm embarking on a mission to work my way through FRS 102, reading a portion on each working day of 2015 and writing a short blog entry on my thoughts and musings (be they few or many).
It's Wednesday and our brief dusting of snow has vanished, so instead of trying to build the world's smallest snowman I'm going to dive into section 6 of FRS 102...
DAY EIGHT (14 Jan)
Section 6 introduces the eager population of UK GAAP users to the Statement of Changes in Equity ('SOCIE'), borrowed from IFRS. The SOCIE is a reserves note with ambitions above its station, and it clearly wants to gatecrash the celebrity front end of the annual accounts instead of the dusty, neglected back pages. It is, accordingly, recognised as a primary statement in FRS 102. The SOCIE includes the total comprehensive income, prior period adjustments ('PPAs') and reconciliations of other equity changes e.g. share issues. It'll have comparatives too - so will be twice as long as the old reserves note.
Of much more interest IMHO is the statement of income and retained earnings (the SIRE - sounds a bit feudal to me). Basically, if the only changes in equity in the year are profit (or loss), dividends and PPAs, then the SOCIE seems like overkill (and you also don't need a two-statement approach since there's no 'other comprehensive income'). So here's an idea - why not have a P&L account and, at the bottom, include retained earnings brought and carried forward, dividends and PPAs? Doesn't that sound just a weeny bit like what we used to do until a few years ago? I think it's a capital idea (pun intended) and could be widely adopted (if your software is amenable, that is).
Tomorrow brings a shocker - the Cash Flow Statement has changed its name! Read more on Thursday...
P.S. If you missed yesterday's instalment click here